by By Roderick T. dela Cruz
High levels of bad and classified loans prompted the Bangko Sentral to
shutter and put LBC Bank under PDIC receivership
High levels of bad and classified loans weighed on the finances of the
Makati-based LBC Development Bank, which was recently closed by the
Bangko Sentral and placed under the receivership of the government's
Philippine Deposit Insurance Corp.
Data from the Bangko Sentral showed that LBC Development Bank, a thrift
bank formerly known as the Banco Real Development Bank that was taken
over by the LBC Group of Companies in 1995, suffered from high levels of
bad and classified loans.
Regulators declined to comment on why the thrift bank and its 19
branches were closed last week. Bangko Sentral Governor Amando Tetangco
Jr. cited the Central Bank Act for placing the bank under the
receivership of state-owned PDIC.
The law authorizes the Monetary Board to close a bank if it has
insufficient realizable assets to pay for its liabilities, unable to pay
its liabilities as they become due, and if it cannot continue in
business without involving probable losses to its depositors and creditors.
The LBC Group of Companies has evolved from a courier company known as
Luzon Brokerage Corp. in the 1950s. LBC Development Corp. acquired Banco
Real Development Bank in June 1995 to become what is now known as LBC
Development Bank.
LBC Development Bank, which is headed by Juan Carlos Araneta as chairman
and chief executive and Marvin Ayende as president, incurred
non-performing loans of P316.3 million representing 27.29 percent of its
total loan portfolio of more than P1 billion as of December 2010. In
comparison, other savings and thrift banks had a single-digit NPL ratio.
The bank also had more than P725 million in classified loans and other
risk assets as of December last year. Classified loans refer to
substandard loans that are in danger of default.
Against these high-risk loans, the bank had only P158.7 million in
specific provision for loan losses.
While LBC Development Bank had nearly P6 billion in deposit liabilities,
its net loans and receivables amounted to less than P1 billion.
Data also showed that LBC Development Bank, a sister company of LBC
Express Corp., extended P24.5 million in loans to its directors,
officers, stockholders and other related interest (Dosri), although none
of these loans were past due.
The bank declared total assets of P6.39 billion as of December 2010,
including P292.6 million in the value of its offices and premises and
P150 million in cash. Its other assets were placed at P3.155 billion.
Real and other properties acquired amounted to P167.4 million. Ropa
refers to properties and assets acquired by the bank after foreclosure.
PDIC assured thousands of LBC Bank depositors that it would pay all
valid accounts and deposit insurance claims as soon as possible. The
bank had a total of 321,516 in deposit accounts.
The state-owned deposit insurer said it would conduct a series of forums
for depositors of the bank and its 19 branches nationwide.
PDIC said of the total P6.09 billion deposits in the bank, only about
P3.73 billion were insured. PDIC insures up to P500,000 in each deposit
account.
LBC Development Bank's head office is located at 809 J. P. Rizal St.,
Poblacion, Makati City.
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